and desirability of any measures which might be used to achieve it’
should be a constraint on reform. It was easy to read the latter words as an
effective bar on reform.
Raynsford went on to consider a number of possible reforms to council
tax, and accepted a clear case for reviewing the number of tax bands and
the ratios between them – at the time of the next revaluation. Council tax
benefit take-up should be improved. Business rates could be re-localised,
with safeguards for business. A local income tax was examined, including
issues such as administration costs, implications for business and the
treatment of particular categories of income. But the overall conclusion,
as with other parts of the review, was that ‘considerable further work
would be required’ to address technical, administrative and distributional impacts.
Smaller taxes and charges, e.g. a local tourist bed tax, a localised vehicle
excise duty or green taxes, could not, the review stated, have achieved a
significant shift in the balance of funding. ‘The case for and against each
of these options should be judged on its own merits.’ The review itself did
not, however, offer views on such merits.
On the day Raynsford reported, the government announced that Sir
Michael Lyons would head a follow-up inquiry to complete the work
33 Office of the Deputy Prime Minister, Balance of Funding Review – Report (London:
ODPM, 2004).
undertaken by Raynsford. Lyons’ report would be published in December
2005 and was expected to produce detailed exemplifications of some of
the possible changes touched on by Raynsford. The government’s decision to implement a revaluation of the council tax base in England in
2007 (a revaluation took place in April 2005 in Wales) was expected to
create an additional dimension to Lyons’ work. However, the revaluation
was abandoned in the autumn of 2005.
If the future of revenue funding remained in the ‘pending’ tray
throughout Labour’s first eight years in office, capital finance was
reformed in a way that was, at least in intent, expected to decentralise
political control. A system of ‘prudential rules’ was introduced to replace
the belt-and-braces controls that had previously been used to limit
councils’ freedom to spend on major capital projects. The new arrangements made it possible for authorities to incur new capital spending so
long as they adhered to a number of common-sense rules concerning
their capacity to make repayments and the total of their outstanding
debts. Unfortunately, the freedoms offered were not widely taken up
because councils were concerned about the long-term impacts of new
borrowing on their revenue expenditure. That is, they feared that extra
debt charges would lead to future capping.
Regional government for England
The four forms of devolved government – Scotland, Wales, London and
Northern Ireland – operating within the United Kingdom in 2001 were
each, predictably, significantly different from the others. In May 2002 the
Office of the Deputy Prime Minister published a consultative document
on the creation of regional governments within England.34 The next stage
of devolution was under way.
The government outlined a model of regional government for England
that was substantially different from those already adopted for other parts
of the UK. English regions were to be given a weaker form of assembly
than that operating in London. However, unlike the London system,
those for other parts of England would not have a ‘mayor’ but would
instead (like Scotland and Wales) select a leader from among assembly
members. Thus, the rest of the English regions were to use a form of
government based on the traditional British parliamentary or local
34 Department for Transport, Local Government and the Regions, Your Region, Your Choice
Revitalising the English Regions (London: TSO, 2002).
government model. Only the capital’s regional arrangements would
feature a directly elected executive.
The powers to be devolved to the new English regions would include
the economic regeneration responsibilities already given to Regional
Development Agencies, plus strategic planning, the allocation of social
housing resources to local authorities and a requirement to publish a
number of strategies. These strategies would, separately, allow the region
influence over skills and employment, transport, waste, health improvement, culture and biodiversity.
The capacity of the regions to raise their own resources was also
heavily circumscribed. English assemblies were to be given the same
power to set a council tax precept that had been given to the Greater
London Authority (though not, oddly, to the Welsh Assembly). However
the government proposed ‘initially to limit assembly precepts through
arrangements comparable to the existing local authority capping regime’
(paragraph 5.9). The new English assemblies were to be capped before
they had even been created.
The new authorities would be elected using the Additional Member
System, a form of proportional representation that had been used in
Scotland, Wales and for the London Assembly. Where a region voted to
introduce regional government, any areas with two-tier local government
(i.e. non-metropolitan counties and districts) would be required to move
to a single tier of unitary councils. The government did not believe the
electorate would be prepared to accept three levels of government below
Westminster.
A Regional Assemblies (Preparations) Act received royal assent in May
2003, allowing the government to move ahead with referendums and
other preparatory work, such as the need to review local government
boundaries within regions where regional assemblies were to be created.
Also during 2003, the government undertook a ‘soundings’ exercise –
including opinion polling – to see which regions were likely to show the
greatest interest in holding a referendum. As a result, Local and Regional
Government Minister Nick Raynsford announced in July 2004 that
people in three northern regions would be allowed to vote later that year
on whether or not to set up regional governments in their areas.
Later, in July 2004, the government published a Draft Regional
Assemblies Bill. On the same day, ministers made it clear that they were
to postpone the referendums planned for the North-West and Yorkshire
and Humberside: only the North-East of England would vote in
November that year.
In the run-up to the referendum, it became clear that opinion was
running against the proposed regional authority. While the ‘Yes’ campaign received the support of a wide range of regional Establishment
and media figures, the ‘No’ campaign publicised their message using an
inflatable white elephant which, they believed, symbolised the bureaucratic and feeble nature of the proposed ne
w government. On 4
November 2004, in an all-postal ballot, the voters of the North-East
rejected an elected regional assembly by 78% to 22%. The turnout was
48%. Electors in every district in the whole region voted ‘No’. It is hard to
exaggerate the scale of the rejection.
Deputy Prime Minister John Prescott conceded on 8 November 2004
that devolution to the English regions was to be abandoned for the foreseeable future. There would be no referendum in either the North-West
or Yorkshire and Humberside. The voters of the North-East had, in the
event, spoken for the whole of England.
2005–2007
Steady as she goes
A number of issues that had emerged during the first two governments
continued to have an impact on Labour in Blair’s third term. The funding
of local government was subject to a review that was due to report in
December 2005. In the event, the Lyons Inquiry was delayed until
December 2006, then March 2007. A revaluation of homes for council
tax, planned for April 2007, had been abandoned by the government
during the autumn of 2005. Other official inquiries, into the planning
system, skills and transport provision were initiated by the Chancellor
and reported in 2006 and 2007.
A gradual process, which had started under John Major, of encouraging councils to propose a single tier of ‘unitary’ authorities continued in
areas where there were county and districts. By early 2007 it was clear that
the Treasury was attempting to slow down even the limited progress that
was being made.
Local government’s sponsoring department, the Office of the Deputy
Prime Minister (ODPM), was radically reconfigured in May 2006. A new
Department for Communities and Local Government was created with a
brief that added ‘equalities’ and ‘community cohesion’ to the traditional
grouping of housing, planning and local government. This was a long
way from the megalithic Department of Environment, Transport and the
Regions that had included transport and the regions, created back in
1997.
But, from 2005 onwards, there were few expectations of radicalism
from the Blair government. There were, however, a number of carry-over
issues that will be considered below.
The Northern Way, regions, city regions and cities
Following the rejection of the proposed regional assembly in the NorthEast in 2004, the post-2005 government sought new ways to advance the
governance of areas larger than existing units of local government. David
Miliband, who was appointed as a cabinet minister within the ODPM
after the 2005 election, spent a year examining local government and
became an exponent of ‘city regional’ arrangements.
The 1997–2001 and 2001–5 governments had already created a significant number of ‘regional’ institutions. In addition to the Regional
Development Agencies and indirectly elected ‘assemblies’ considered
above, the three northern regions (the North-East, the North-West and
Yorkshire and Humberside) were grouped together in the supra-regional
Northern Way, a grouping that had its own officials and governing body.
Below the regional level, the eight ‘core cities’ (Birmingham, Bristol,
Leeds, Liverpool, Manchester, Newcastle, Nottingham and Sheffield) had
developed a strong case for these major centres to be seen as the drivers of
economic and social change across their regions.
David Miliband advanced the case for a level of governance between the
city and the region.35 He argued that there would possibly be advantages
to a city-regional level of government, coupled with a directly elected
mayor. The Centre for Cities, an urban think-tank, provided intellectual
support for the idea.36 Such an arrangement would broadly replicate the
Greater London Authority, which had been created for the capital in 2000
and which ministers judged a success. Metropolitan authority leaders and
authorities were not convinced by the Miliband plan, though they were
prepared to create voluntary joint boards across city regional areas.
They need not have worried. In May 2006, Miliband was moved on
and his successor, Ruth Kelly, appeared less convinced by city regions.
Moreover, a pamphlet published in July 2006 by the New Local
35 See, for example, ODPM, A Framework for City Regions (London: TSO, 2006), which
explored the subject in the light of Miliband’s concerns.
36 Adam Marshall and Dermot Finch, City Leadership Giving City-Regions the Power to Grow,
Centre for Cities (London: IPPR, 2006).
Government Network and, crucially, authored by Treasury ministers Ed
Balls and John Healey, argued that regions, not city regions, were the way
ahead.37 The apparent stand-off between regionalists and city-regionalists
was to be informed further by the completion of a ‘sub-national review’ of
economic development and government, which fed into the autumn 2007
Comprehensive Spending Review.
In the last days of the Blair premiership, the Department for Transport
(DfT) published its own proposals to strengthen the governance of transport at the level above the core cities, but below the region.38 There had
been a number of earlier reports pointing to the logic of basing cityregional authorities on metropolitan transport institutions39 and the DfT
appeared convinced by the arguments in favour of reform.
Another White Paper
The key publication of the final Blair term was the local government White
Paper of October 2006.40 This document followed many earlier ones and
provided arguments for mild experimentation or change to local government. The key proposals were: first, to extend the use of Local Strategic
Partnerships, allowing councils to lead an array of local institutions (e.g.
health providers, the police and social landlords) and pool some budgets.
Second, to introduce a ‘community call for action’, allowing neighbourhoods to demand that the council or other service providers deliver services in a particular way within a local area. Third, there should be a greater
use of neighbourhoods and parish-level government. Fourth, new models
of leadership should be introduced, including additional elected mayors or
fixed-term executive leaders. Finally, the government suggested that in
shire areas, where there continued to be two tiers of local government,
authorities should consider moving to a single tier of ‘unitary’ councils.
None of these ideas was new. All had, in one form or another been
around for some years. The difficulty for the new Secretary of State, Ruth
Kelly, was that she was operating at the start of a prolonged interregnum
37 New Local Government Network, Evolution and Devolution in England How Regions
Strengthen our Towns and Cities, by Ed Balls, John Healey and Chris Leslie (London:
NLGN, 2006).
38 Department for Transport, Strengthening Local Delivery: The Draft Local Transport Bill,
vol. I: A Consultation, Cm. 7043-I (London: TSO, 2007).
39 Tony Travers and Stephen Glaister, Local Transport: How Small Reforms Could Make a Big
Difference (London: LG
A, 2006).
40 Department for Communities and Local Government, Strong And Prosperous
Communities The Local Government White Paper, Cm. 6939-I (London: TSO, 2006).
between Tony Blair and Gordon Brown. The White Paper was cautious
and offered a number of possible reforms which, as described, could
either lead to a relatively radical reform or, alternatively, virtually none.
By the time Blair left office, the process of reform was left unresolved.
The Lyons Inquiry
The Blair government’s decade-long, tentative efforts to suggest reforms
to local government finance had, from 2004, centred on the Lyons
Inquiry. Lyons finally reported in March 2007. Having worked within
well-understood political constraints, the report was a modest set of proposals41 that its author believed to be ‘developmental’, rather than the
‘big bang’ advocated by commentators such as Simon Jenkins.42
Lyons accepted that council tax, introduced by the Conservatives in
1993, should be retained, though there might be modest reforms to make
the tax paid by households relate more closely to different property prices.
There should be a revaluation of the tax base. Moreover, ministers should
no longer use capping to limit council tax rises from year to year. The business rate, nationalised by the Tories in 1990, should remain a centrally
determined tax, but there might be a local supplement. Local income tax
should be further explored, with a view to assigning part of it to local
authorities in the longer term. Smaller taxes, e.g. on tourism, and charges,
e.g. on waste, should be considered. There should be greater incentives for
councils to build up their council tax and business rate yield; authorities
should be allowed to keep part of any growth in the tax base.
The government rejected Lyons’ proposals on capping, a revaluation
and new taxes. A supplement to business rate was accepted, as was the
possibility of charging households for waste and other environmental
problems. Overall, there was no suggestion that the funding of local government could be radically changed. Tony Blair handed over the system
to his successor where John Major had left it a decade before.
London
Blair’s radicalism in relation to devolution continued in a modest way in
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